Strong retail sales in the last three months of 2012 added to evidence the economy had hauled itself out of a soft patch by the end of the year and was doing a lot better than last week's grim jobs figures implied.

The volume of goods sold by retailers jumped 2.1 per cent in the December quarter, the strongest quarterly growth for six years.

Adjusted for population growth, however, real retail sales are still 2.5 per cent per head weaker than they were back then.

In dollar terms, the pick-up in sales was a bit less spectacular: 1.7 per cent (the best for two years) overall or 1 per cent (the best for a year) when petrol stations and car yards are excluded.

This follows other recent indicators the economy has more momentum than the 22,000 drop in jobs in the last quarter suggests.

Consumer confidence is at a 32-month high, the PAYE tax take is up nearly 7 per cent on a year ago and the housing market is growing apace.

That strength has the financial markets betting the Reserve Bank will raise interest rates before the year is out, and the dollar has been pushed to new highs on a trade-weighted basis.

But Deutsche Bank chief economist Darren Gibbs thinks the markets are underestimating chances the Reserve Bank will follow its Swiss counterpart, which this week used new regulatory tools to slow the housing market rather than the blunt instrument of the official cash rate.

As it is, the positive side of a high dollar is evident in yesterday's retail numbers, which show prices falling in 12 of the 15 store types covered, including a 3.3 per cent drop in prices for electrical and electronic goods, making 10.6 per cent for the year.

Westpac economist Michael Gordon said the impact of the high dollar came on top of the general downward trend in world prices for some goods, particularly electronics.

"Constant innovation means that prices, in quality-adjusted terms, have been falling at double-digit annual rates," he said.

Vehicle sales rose 2 per cent in the last quarter to be 14.7 per cent higher than a year earlier. "This has been the fastest-growing retail sector in the last year, but it was also the hardest hit in the recession; sales remain about 5 per cent below their 2007 peaks."

Are we climbing out of the woods?

• Tax income through PAYE up 7%• Vehicle sales up 2% but remain 5% below 2005 peak• Prices fell in 12 out of 15 store types due to strong dollar• Retail sales up 2.1% but still 2.5% per capita below 2006 levels• Consumer confidence at 32-month high• Employment 22,000 fewer people in jobs